"Managed Hosting in Europe: A Review of the Managed Hosting Market and Suppliers in Europe"

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"The term "managed hosting" describes the provision of a ready to use IT stack including hardware and infrastructure software for the deployment of applications."
Source : Quocirca Ltd

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Managed Hosting in Europe: A Review of the Managed Hosting Market and Suppliers in Europe

The term “managed hosting” describes the provision of a ready to use IT stack including hardware and infrastructure software for the deployment of applications. Providers house the infrastructure in central data centres accessed by customers over the internet. In the past this has usually been on the basis of hardware servers dedicated to individual customers, however the increasing use of virtualisation has allowed managed hosting providers to reduce costs by sharing infrastructure between customers, creating the earliest versions of what the industry now refers to as compute clouds. Computing platforms provisioned and managed by specialists provide higher service levels, greater ease of secure access and more manageable costs than many organisations are able to achieve internally.

Managed hosting in Europe

A review of the managed hosting market and suppliers in Europe

The managed hosting market in Europe is thriving despite the current economic conditions. This report looks at the reasons why, what buyers should look for and who the main providers are.

Executive summary

• Managed hosting is attractive to organisations of all sizes as it allows them to acquire IT infrastructure at a controlled cost, whilst reducing risk and adding value to their broader business community
  Even during economic hard times, managed hosting providers are seeing growth as businesses can deploy new applications on infrastructure paid for out of operational expenditure. The service levels offered are often better than those provided by internal IT departments and applications are easily shared with customers, partners and suppliers.
• Quocirca recognises four types of managed hosting provider (MHP)
  First there are the pure plays for whom managed hosting is their primary business, second are the major system integrators that offer managed hosting as part of a broader service delivery, third are ISPs and network service providers that provide managed hosting as a value add to their networking services and finally there are the cloud platform providers that have emerged out of the software as a service market.
• MHPs vary in how they target markets and how they sell their services
  Some MHPs focus mainly on the enterprise, others more on small and medium sized business, whilst a few specialise in working with independent software vendors. Their market focus will control how they take their service to market and this report helps identify the right provider to approach for a given size or type of end user organisation.
• Charging models vary but are always based around a subscription
  Historically for one-to-one infrastructure provision, charging has been based on a fixed cost per allocated resource, but with the increasing use of shared infrastructure there is a direct link between the customer and physical resource and has lead to more flexible charging models such as per transaction, per volume of data or per user/month.
• Most managed hosting providers adhere to the best practice standards for data security and IT management
  ISO27001 and related standards outline best practice for data security and is widely adopted by managed hosting providers, as is ITIL® for good practice in IT infrastructure management. Suppliers can also help their customers with specific needs: for example meeting the requirements of the payment card industry for handling credit card data.
• The hardware used by MHPs is largely irrelevant to end user organisations and the software infrastructure provided is driven by customer demand, which is mainly for Microsoft Windows and Linux About 60% of demand is for Windows and 30% for Linux. The increasing use of virtualisation allows the separation of hardware and infrastructure software and the sharing of resource, dramatically reducing costs. VMware is the most widely use virtualisation platform, even by providers that focus on Microsoft.

Conclusion

All businesses have a core focus and for managed hosting providers that is the provision and management of top quality IT infrastructure services. Businesses that recognise the benefits of a highly available and secure computing platform should consider turning to experts for the provision of this, freeing their organisation to focus on its own core activities.

1 Introduction—from mainframe bureaux to cloud computing

This paper reports on the state of the managed hosting market in Europe in 2009.

“Hosting” is a widely used term in the IT industry; the addition of the verb “managed” narrows it to include those hosted services that are managed for the subscriber by the provider. So managed hosting does not include pure colocation services, where just data centre space is provided. Neither is it taken to include hosted business applications such as email and CRM (so called software as a service, SaaS).

Trying to categorise such things is always problematic as there is much overlap. Many managed hosting providers (MHPs) buy data centre space from co-location providers and have SaaS providers as customers. Perhaps the best way to think of a managed hosting service is the provision of a ready to go managed computing stack including server, storage and networking hardware plus infrastructure software on which customer applications are deployed. Driven by customer demand, the software component of that stack is most commonly based on Microsoft Windows or Linux, increasingly virtualised using VMware.

There is nothing new about managed hosting; it is almost as old as the IT industry itself. Back in the 1960s it was possible to buy-in compute power from mainframe service bureau and, for some, this is still a lucrative business. There have long been service providers that will take over existing hardware and software infrastructure and manage it, sometimes literally putting it in a van and moving it to the hoster’s premises. In the last decade, however, a new sort of managed hosting has emerged based on cheap commodity hardware.

Initially this was mostly one-to-one hosting, where each customer had their own assigned hardware servers and benefited from sharing the cost of just data centre and network infrastructure with others. However, the concept of sharing has gone a stage further in the last few years with the widespread adoption of virtualisation, allowing the one-to-many sharing of server and storage hardware enabling providers to achieve ever greater economies of scale. The culmination of this process has led to the emergence of so called cloud computing platforms.

Whilst this report focuses on traditional managed hosting and not cloud platform providers, it is the view of some in industry—including Quocirca—that a managed hosting service based on shared infrastructure and a cloud platform amount to much the same thing and, at the very least, both aim to provide computing resources to similar types of customers. Although it should be noted that MHPs largely focus on the provision of Windows and Linux infrastructure, some cloud platforms are highly proprietary. This version of Quocirca’s managed hosting report covers cloud computing platforms in section 4.1.

2 Report background

This report describes the benefits of managed hosting and details the services of some of the major providers. The market is huge, so it limits itself mainly to those that provide their services across Europe. This may or may not mean infrastructure in multiple countries as some, for example Rackspace, sells managed hosting service across Europe using infrastructure based in just one country (UK); others, such as NTT Europe Online, have facilities across Europe. In some cases local infrastructure can be an advantage for performance reasons (see section 5) but there are other benefits such as better access to language skills for support and the ability to offer contracts under local law. Some smaller, local MHPs are referred to where an aspect of their service is of particular interest.

The report does not claim to be 100% inclusive, because there are so many providers, but Quocirca believes most of the major suppliers that fit the definition “pan-European managed hosting provider” are included; apologies upfront for any omissions.

With any such report there will be those reading it with an interest in managed hosting who will want to report such errors and omissions for a planned future version of the report—Quocirca is happy to receive such feedback via the following email address managed_hosting@quocirca.com.

The level of detail provided to Quocirca for this report varied from one MHP to another. Quocirca sent a detailed questionnaire to all the companies that are featured. Some enthusiastically returned it within days, some chose not complete it for non-disclosure or other reasons. Tables and charts are dispersed throughout the report to show how different provider’s offerings vary; where detail was not available this is indicated.

This is a free report in line with Quocirca’s business model. Upfront sponsorship for the report was provided by NTT Europe Online and Quocirca is grateful for its support. NTT Europe Online has a vested interest as it is a provider of managed hosting services. However, the report is intended to be impartial and Quocirca believes the reader will find this to be the case, although the case studies included are all provided by the sponsor.

3 Why managed hosting?

IT infrastructure has become more and more of a commoditised utility and, generally speaking, businesses don’t run utilities, they buy them in. Furthermore, for most organisations, the availability of IT infrastructure is business critical; it takes specialists to make sure utilities are constantly available and performing well.

Before the mid-1990s the provision of managed hosting, in the form of mainframe bureaux, was restricted to large enterprises. One reason for this was the cost of leasing a network connection to such services. The availability to all of a cheap to use, standardised, ubiquitous network from the mid 1990s onwards (the internet) meant it was possible to open up managed hosting services to all.

Whilst many enterprises make extensive use of managed hosting services it has also been a boon for smaller organisations, especially those where internet delivery has become critical to their business. These fall into two categories:

1. Small and medium sized business (SMBs) that have limited in-house IT skills
2. Independent software vendors that are moving to a software as a service (SaaS) based delivery model

The benefits of managed hosting for any organisation are best described in terms of improved cost management, business risk reduction and added business value.

Cost management

Generally speaking, managed hosting offerings are paid for through a subscription (see section 4.3), which is hard to compare directly with the alternative of buying and managing all the components in-house. The fact that such subscriptions are paid for out of operating expenditure (opex), rather than capital expenditure (capex), appeals to many businesses, especially when on-going finances are unpredictable. Using a managed hosting platform will almost certainly lead to a lower cost of ownership, due to the economies of scale achieved through sharing infrastructure from servers to data centre space.

Furthermore, because MHPs pay close attention to cost it is in their interest to manage software licences carefully; an MHP will not pay for more software licences than it needs. They also benefit from special licencing arrangements with software vendors that are not available to end users, such as Microsoft SPLAs (service provider licence agreement). So economies of scale apply just as much to software as to hardware.

Risk reduction

Ensuring IT systems are kept running is a specialist task. For sure, a server can be expected to run for months or years without trouble, but when it does go wrong, fixing it or replacing it quickly is essential. Add in all the other links in the chain—storage hardware, network routers, firewalls etc.—and regular problems with availability are inevitable. Keeping infrastructure running, ensuring there is built-in redundancy and spare parts available, is the job of MHPs, who do it all based in purpose-built, enterprise-class data centres. IT failure is a risk most do not want to contemplate; MHPs can reduce the risk of it happening, committing to service levels that internal IT departments would not.

Another area where risk becomes easier to manage relates to escrow agreements. Such agreements ensure the availability of software code should the provider cease trading. Using software deployed on MHP infrastructure means that the ownership of the software can change, without any disruption of service. If the software was deployed on the software provider’s own infrastructure it is possible that the hardware assets involved could be sold by receivers and that would mean the end user having to redeploy the given software following a possible disruption of service of indeterminate length.

4.3 Charging models

Charging models for hosted services vary, but they are all based on a subscription of some sort. The more control the service provider has over the infrastructure being managed, the more likely they are to use virtual parameters such as compute power used, number of virtual servers invoked or more business-orientated metrics such as per user or per transaction charges. When the customer specifies the hardware, charging tends to be based on material parameters such as allocated floor space, number of rack units, power use and items of hardware under control.

With a standard commoditised stack the service provider understands what it takes to power it, maintain it and ensure high levels of availability better than when they are managing bespoke equipment. This then allows them to bring charges in-line with a customer's own business model; so, for example, an ISV providing a hosted email service may want charging based on the number of active mail boxes whilst a ticketing agency may want transaction-based pricing based on tickets issued.

Those MHPs that have a focus on the ISV market will usually be flexible enough to provide charging models that reflect those of the ISV itself.

4.4 Standards

There are a number of standards that pertain to good data centre management and data security. Some will matter more than others depending on the deployment being planned. Table 2 shows the standards complied with by individual MHPs.

ISO27001

Compliance with ISO 27001 shows the MHP follows generally accepted good practice to ensure the confidentiality, integrity and availability of data. The standard is widely adhered to by MHPs, but check for full certification, which means compliance is externally audited every 6 months.

ITIL®

Information Technology Infrastructure Library outlines the practices that are the most beneficial to delivery of IT services; v3 is the latest version and many organisations are in transition.

COBIT

Control Objectives for Information and related Technology is a set of best practices for IT set out by ISACA (Information Systems Audit and Control Association).

SAS 70

Statement on Auditing Standard 70 is targeted at those who provide outsourced services, such as MHPs. It examines how they process transactions and how they are audited.

PCI DSS

Payment Card Industry Data Security Standard: MHPs do not comply directly with PCI standards, but they can help their customers to. The standard which details how payment card information should be handled requires certain levels of physical and virtual security.

PRINCE2 A project management method defined by the UK's Office of Government Commerce (OGC) for UK government projects

4.5 Service level agreements (SLA)

Any contract made with an MHP should address service levels and define what the penalties are for failing to meet them. It has already been pointed out in section 3 that one of the benefits of working with an MHP should be a better SLA than might be expected from an internal IT function but also that failure to meet the defined SLA has consequences.

A key metric in a SLA is system availability, or "up-time", as a percent of total time. Typically MHP SLAs provide upwards of 99.95%, but remember there is a big difference between 0.05% outage which is almost 450 hours a year and 0.005% outage which is less than 45 hours a year.

To provide visibility into the systems, most MHPs provide some level of access to systems data relevant to an individual customer, but the ease of access to such information and the tools provided will vary. Generally, access is provided via a web-based customer portal. Some, such as Global Crossing and NTT Europe Online, see the access tools they provide as being a key differentiator.

4.6 Redundancy

The reason that MHPs offer such high service levels is because their business would fail if they did not. Their organisations and business processes are based around keeping IT going 24 hours a day, 7 days a week, 52 weeks a year. To achieve this, MHPs have to have built-in redundancy at all levels. This includes hardware, network access, power supply and the data centre itself (see section 5).

For one-to-one hosting, redundancy is relatively expensive; it might require a complete replicate system on hot standby so as soon as a problem occurs all users and transactions can be switched over whilst the failed system is fixed. MHPs will charge a premium for this.

With shared infrastructure, redundancy is built-in and automatic and consequently much cheaper. It is incumbent on the MHP itself to have a fully redundant infrastructure. The infrastructure will not be reliant on a single item of hardware: should a server or router fail, it can be replaced whilst the rest of the system keeps running. A storage failure of some sort may lead to some disruption whilst data is recovered, unless mirrored data sets are in use (for which some MSPs will charge a premium). Most MHPs will have at least one secondary data centre facility.

4.7 Application testing

Obviously, before an application can be deployed it needs to be developed and tested. Most organisations maintain an internal development platform, but will still need to test applications on an MHP's infrastructure before deployment; this includes post deployment updates. With one-to-one hosting, recreating the deployment environment is expensive but with shared infrastructure it is easy and cheap and an isolated virtual environment can be provisioned using the same underlying infrastructure that will be used for deployment.

End user case study—Boursorama
Boursorama is one of Europe's leading online share trading brokers and, in 2006, became an online bank too. It is active in France, Germany, Spain and the UK.
Boursorama.com brings together financial information from many sources to provide a single point of access for a range of services producing over 3 million unique visitors a month. A disruption in Bousorama's online service would mean a complete loss of contact with its customers and cause serious reputational damage. It needs a guaranteed SLA with high uptime commitments.
To achieve this, Boursorama initially worked with a US provider, but wanted to bring its operations close to home to improve performance times, which are critical for financial transactions.
In 2003, after an evaluation of European MHPs, Boursorama turned to NTT Europe Online's French operation which offered the best value whilst meeting the required SLAs, could perform the migration and provide full redundancy with failover to NTT's London data centre.

5 MHP infrastructure

This section looks at the infrastructure choices made by MHPs and options that they offer to their customers.

MHP hardware preferences

For the purchaser of managed hosting services hardware is pretty much irrelevant; it does not matter providing the service works reliably. However, for the MHP itself, having good relationships with selected hardware providers are important to ensure favourable pricing and good service levels, so they work with selected suppliers from a predictable list.

For the hardware vendors themselves, these relationships are critical, as managed hosting changes the whole dynamic around how businesses pay for server MIPs, gigabytes of storage and network bandwidth.

This is especially true in the SMB market; consider the sale of an accounting application. In the past each SMB would buy an accounting system and choose a hardware server to deploy it on—so the hardware vendors had many opportunities to sell their equipment providing they had the right channels. However, if the same accounting application is now sold as service deployed on hosted infrastructure, the hardware decision is made just once, by the MHP—in fact, it was probably made long before the decision to deploy the accounting application service. In this way the hardware requirements of many businesses are aggregated up in a single enterprise size chunk. For the hardware vendors the stakes are high but for the end user there is no longer the distraction of a utility purchase, they can focus at a higher level in the IT stack where the value add to their business is more obvious—software, which is covered in the next section.

Nearly all hosting services are based on commodity x86-based hardware. HP is the most widely used, followed by IBM and Sun. Dell and Fujitsu are less favoured although, unsurprisingly, as an MHP Fujitsu mainly uses its own hardware. It will be interesting to see how Cisco fares as it enters the server market with its unified computing initiative as it already has a relationship with most MHPs for the provision of networking kit. Some still offer services around other proprietary hardware, for example IBM mainframes, but this is generally a bespoke one-to-one service and is not about sharing infrastructure. Fujitsu has a legacy MVE mainframe business from its acquisition of ICL in 2000.

For storage, NetApp is the most widely used, followed by EMC, amongst those that reported to Quocirca; IBM and HP are generally rated as secondary vendors. Some turn to more specialist vendors such as 3 Par and Pillar; interestingly, 3 Par, a specialist provider of high end storage systems, has placed a long term bet on the ascendancy of managed hosting as the main way in which IT infrastructure will be provided to SMBs in the long term.

For networking the use of Cisco is pretty much ubiquitous, with Juniper being used in places and some other vendors favoured as secondary suppliers.

Software preferences

The mix of software provided by MHPs reflects customer demand more than their own preferences. Whether it is an ISV deploying a SaaS offering or an end user deploying their own application, there will be a preferred software environment for doing so. That said, currently two main software infrastructure stacks prevail in the IT industry for application deployment; Microsoft Windows/.NET and Linux/Java.

ISV case study—2e Systems 2e Systems is an ISV serving four major airlines in Germany, where it is based. It provides services for flight bookings, check-in, frequent-flyer programmes and mobile notification—all considered critical for the on-going efficient operation of an airline.
2e Systems wanted to bring all its applications together to offer them as a single service and, to achieve the highest possible service levels for its customers, it sought a managed hosting partner.
Eventually 2e Systems selected NTT Europe Online because it was the most cost effective, could provide the required service levels and a charging system that reflected the business model of airlines; for example, a cost per booking for ticket sales.
The applications are hosted at NTT's Frankfurt data centre, which appealed to 2e Systems as it allowed the teams from both companies to get to know each other as they worked together to roll out the new services.

Where MHPs provide figures around usage, Windows prevails by a ratio of around 2:1, although some, for example 7global, specialise in only providing Microsoft. The Linux distribution most widely used is Red Hat, with some Debian and SUSE. Most also support UNIX where required (Sun Solaris, HP UX and IBM AIX), and this makes up around 10% of business; some reporting a decline, others slow growth compared to its two bigger competitors, to which UNIX-based applications are often being migrated.

One thing that is clear from all MHPs is the rising use of virtualisation. NTT Europe Online reports that 70% of quotes now require a virtualised environment and it is a necessity for sharing infrastructure. One platform stands out above all others—VMware—with XEN and Microsoft Hypervisor being used to a lesser extent. Virtualisation not only makes the sharing of infrastructure easier, but means changing requirements can be more easily taken into account. Those MHPs that predicted future requirements expect demand for Microsoft-based infrastructure to outstrip that for Linux.

At the application sever level, .NET and J2EE are supported in line with operating system requirements. The J2EE installed base is split between IBM WebSphere, Oracle (including the Oracle Application Server and BEA WebLogic) and, to a lesser extent, open source products like JBoss and Tom Cat.

Finally, it should be pointed out that some MHPs specialise in the direct support of certain business applications like SAP, Oracle Applications or Microsoft Exchange, SharePoint and Dynamics. This should not be confused with ISVs who use MHP infrastructure to provide their own applications as a service.

Data centre location

Does a data centre location matter? To an extent yes, but it is more about the resources available at a given location than the location per se. Many MHP customers will see little need to visit its premises, except maybe during the selection phase. For some time-critical applications, such as share trading where split second timing can make a difference, it is seen as preferable for it to be physically close to a data centre, hence the proliferation of them in London. However, this can lead to its own problems, especially regarding power supply.

Power has rapidly become the limiting factor for selecting locations for new data centres, and one way to get around this is to head for areas where there is excess supply; for example South Wales in the UK, where manufacturing has declined, leading to excess capacity. Choosing such locations has the additional benefit of abundant cheap labour, albeit with a certain amount of retraining required. There has been a trend by some to move to be near renewable power sources, but as wind and fast flowing water tend to be in remote areas there is a danger that any environmental benefits are off-set by some MHP employees, who actually need to work at the data centre site, having to travel further to get to work.

Another consideration is network bandwidth. MHPs need direct access to the high bandwidth internet backbone to ensure high performance, often seeking to have two providers available to provide redundancy. This is a major consideration for any MHP building its own data centre, but for those that work with co-location providers, such considerations will already have been taken in to account. MHPs that are also carriers, such as BT and Cable & Wireless will, for obvious reasons, provide primary internet access via their own networks.

Table 3 shows the European countries where the MHPs covered in this report have data centres. As mentioned in section 2, in-country presence can be an advantage for local language and legal support.

Many MHPs are consolidating data centres; for example, IBM has reduced its number of data centres worldwide from around 100 to about 30. It might be useful to show total data centre floor space under management or a measure of available spare data centre capacity, but few MHPs make such figures public, and if you are entering a contract to use shared infrastructure, then available space is irrelevant as you want it to be filled with state of the art hardware ready and waiting to run your applications.

End user case study—UEFA
The managing body for European football, UEFA, provides a streaming video service for all its matches to 35 broadcasters for viewers of matches in 120 countries.
To produce consistent high quality output UEFA required a reliable platform, a high performance network and efficient content distribution capability. In addition it has to protect digital broadcast rights across international boundaries.
Rather than trying to achieve this itself, in 2003 UEFA turned to NTT Europe Online, which has enabled it to provide a consistent high quality service for the last 6 years.

Security

For many organisations the fact that data is stored outside of their own physical premises when working with MHPs raises concerns, but providing due diligence has been done in selecting a provider this concern is misplaced, especially if they are complying with relevant standards such as ISO 27001. In fact the reverse is true; working with an MHP should provide enhanced levels of security simply because the infrastructure it is stored on is housed in a secure enterprise-class facility and that those managing it have lot at stake if security is breached.

All MHPs provide fundamental IT security, including encryption, secure remote access, malware detection, firewalls and so on, but the level of service offered and the types of products used will vary and in some cases there may be additional charges for enhanced security.

Physical security is also an issue and gaining access to the physical infrastructure of an MHP will be harder than it is to breach the premises of many SMBs.

Power supply and environment considerations

For MHPs, considerations around power supply are fundamental and when a new data centre facility is built or colocation provider selected, these data centres require a continuous and stable power supply. Most rely on taking utility supply from the grid but have an emergency backup capability in place should the grid supply fail. This usually consists of a huge array of batteries to keep things running for a few minutes whilst backup generators are started up, usually powered by fuel oil stored on site for such emergencies.

As with the use of IT anywhere, MHPs are making more and more effort to make their use of power more efficient. Hardware and software innovation helps with this and it is in the interest of MHPs to be using leading edge products in this regard. Particularly for one-to-one hosting, MHPs sometimes base their charging on power usage (see section 4.3).

MHPs can drive environment messages around their efficient use of power; however some take it a stage further by seeking to use only sustainable power supplies either purchased over the grid, or by locating near green power generation facilities, such as eLINIA, which derives power from waste, and Centrinet that makes use of local windmills. As has been said earlier, a remote location for a data centre near a green power source is all well and good, providing all the saved omissions are not cancelled out by employees that have to work on site commuting long distances.

Claims to be carbon neutral should be examined closely; for example some environmental claims are founded on carbon off-setting (planting trees etc. in lieu of energy use), which is considered insubstantial by many environment groups.

Finances

Finally, check the state of a given MHP's finances. In the dot-com crash at the turn of the 21st century many MHPs went out of business or were acquired. The market is more mature now and the suppliers covered in this report are all substantial organisations so this is less of an issue, but should still be a consideration.

6 Conclusions

Whether your organisation is a large enterprise, an SMB or an ISV, there will be benefits to be found in working with MHPs for sourcing part if not all of your IT infrastructure requirements. Finding the right MHP will take a degree of due diligence. The partnership that is formed needs to be long lasting, as changing your MHP is possible but undesirable.

There is plenty of choice in Europe from the managed hosting specialists to the systems integrators, ISP and network infrastructure providers that provide managed hosting as an add-on service. Those already working with MHPs recognise the benefits through better cost management, improved customer service and more reliable service provision. Few organisations revert to in-house management once a partnership with an MHP has been formed

7 MHP summary descriptions

Quocirca has defined four types of MHP in section 4.1 of this report. Entries for vendors for three of these types are listed here by category. A final section lists what Quocirca has termed "ones to watch", which includes smaller providers which cannot be considered pan-European or those who have short term plans to set up in Europe.

7.1 Type 1—pure play MHPs

A pure play MHP has operations and a sales process that is geared for all sizes of business and can scale up their services for customers as they grow. For a managed hosting service provider to say it serves the SMB market must mean that it has the sales process in place to deal with such business.

7.1.1 NTT Europe Online

As its name would suggest, NTT Europe Online (NTT) is the European online services subsidiary of the Japanese communications giant NTT. NTT Europe Online was formed in 2006, 6 years after NTT acquired Verio, a managed hosting service provider with active operations across Europe. NTT has expanded the original service and now has data centres in Germany, France, UK, Spain and Switzerland, giving it local language and contractual support in all the major European markets.

NTT targets both the enterprise and SMB markets with a range of services, including the straight provision of hosted infrastructure and other services such as application management, video archiving, threat management and virtualisation services. NTT also works with ISVs and is a delivery partner for IBM, Microsoft, Sun and Oracle.

Managed hosting, provided using a shared infrastructure, constitutes 90% of NTT's business and it has been growing at about 40% per year. It sees cloud computing, and in particular private clouds, as a natural extension of this. 50% of its infrastructure is Microsoft Windows based and 45% Linux, the remainder being UNIX.

NTT is ISO27001 certified and is seeking PCI certification. Its engineers are trained to ITIL® v2/v3 level. It has various pricing models based on per transaction, per volume of data processed, per unit of processing time used etc. depending on requirement. NTT sees cloud services as an important next step in its evolution and will be launching new services in 2009 with a focus on security and reliability.

http://www.ntteuropeonline.com/

7.1.2 Rackspace Hosting

Headquartered in the UK, Rackspace Hosting Europe provides managed hosting, email hosting and cloud services across Europe, Middle East and Africa. In 2008, Rackspace opened a new 4,600 square meter data centre in Slough (UK) to supplement its facilities elsewhere in the UK, USA and Hong Kong. All of its data centres are SAS 70 compliant. Traditionally Rackspace Hosting has provided dedicated servers to enterprises, SMBs and ISVs, offering platforms based on Microsoft Windows, Red Hat Linux and VMware.

In the last few years Rackspace has developed a cloud platform known as Mosso, which gives customers the cost benefits and scalability of a virtualised infrastructure. It has three cloud services: CLOUD Servers, a Linux development and deployment platform; CLOUD files, a storage and content distribution network; and CLOUD Sites, a deployment platform for specific supported technologies such as PHP, MySQL, Python, .NET, SQL Server and IIS.

Rackspace is noted for what it calls "Fanatical Support®". http://www.rackspace.co.uk/support/

7.1.3 Savvis

Savvis provides a wide range of hosted data centre services from co-location through to cloud offerings, which it has had for over 4 years. Shared infrastructure services are built using Savvis's flexible service model based on standard components. Savvis provides its services to customers across Europe and beyond, but it has core strength in the UK. Its main data centre infrastructure is in the UK with points of presence in Europe. It has recently built a new state-of the art facility in Slough in addition to data centres in Reading and London.

Savvis' focus is principally on the enterprise market, where it has always provided dedicated hardware services, enabling its customers to consolidate multiple data centres into a single Savvis facility. Over the last five years Savvis has moved more and more into the provision of shared and utility based infrastructure. It has announced two Cloud Compute offerings, which have been modelled on its successful heritage as a utility computing provider. "Dedicated Cloud", where servers are provided on a one-to-one basis with other infrastructure shared and "Open Cloud", where everything is based on shared infrastructure.

Savvis' data centres in Europe are all ISO27001 accredited and SAS 70 compliant. Savvis follows ITIL® standards and also helps some of its customers to achieve PCI compliance. http://www.savvis.net/

7.1.4 Attenda

Attenda brands itself "The always on Managed Services Company". It has four data centres in the UK and Germany, providing services targeted at the mid-market and ISVs. Attenda is part of Microsoft's incubator program for ISVs wanting to move to a SaaS model.

Around half of Attenda's business is the provision of hosted servers on a one-to-one basis, but it also has a sizable customer base using its shared infrastructure and is developing a cloud platform where it expects to see the most growth in the next few years. The majority of its customers use a Microsoft based software stack.

Attenda has achieved ISO 27001, IS0 20000, ISO 90001, PRINCE2, ITIL® v2/v3 and Carbon Neutral Office compliance for all its data centres and is working towards full PCI compliance. This all means Attenda has tight process control.

It offers a number of pricing models, including price per item of hardware, price per user, price per transaction and/or a fixed price for agreed services over the length of a contract.

http://www.attenda.net/

7.1.5 7global

7global is a UK-based provider of managed hosting services focused almost entirely on the provision of Microsoft infrastructure and applications, although its provision of shared infrastructure is achieved using VMware for virtualisation. Its data centres are all fully ISO 27001 compliant.

7global believes growth will mainly come from the provision of application-level services, for example Microsoft Dynamics CRM, SharePoint portal and Exchange email, rather than at the pure infrastructure level, although this is currently the majority of its hosting business. 7global is an incubator partner for Microsoft independent software vendor (ISV) programme.

For infrastructure provision, 7global provides fixed price contracts for agreed resources over a given period of time, whilst application-level services are charged on a per user per month basis.

http://www.7global.com

7.2 Type 2—systems integrators that offer managed hosting as part of a broader service offering

Some organisations that provide managed hosting services are not really interested in selling them as standalone services, the provision being embedded in larger contracts around IT delivery. Some of the big systems integrators, such as CSC and HP/EDS, fall into this category and are not covered in this report.

7.2.1 Atos Origin

Atos Origin is a global systems integrator that does well over 90% of its business in Europe. It is principally focused on the enterprise segment and sees managed hosting as part of a broader services engagement. IT has 31 data centres in Europe.

Atos has reached its current size through merger and acquisition and its data centre portfolio reflects this. However, Atos has striven to ensure a single standard across all data centres which are all managed to ITIL® v2/v3 level to ensure what Atos calls a "continuous service delivery model" (CSDM).

Its history of serving enterprises has left Atos with a sizable mainframe customer base and 50% of its managed hosting revenue is mainframe-based, the majority of the remainder being Windows and UNIX. Most is based on dedicated hardware, either co-locating equipment owned by customers and managing it for them or provision of oneto- one utility servers owned by Atos. There are plans to provide virtualised hosting on a one-to-many basis.

Traditionally Atos has had usage-based pricing but for more dynamic delivery it uses a system called MOOD (managed operations on demand), whereby the customer pays a base price and what they pay is adjusted each month depending on whether they have over or under used the service. Atos has recently implemented a pay for use pricing.

Atos has a green IT initiative, called H@RMONY, for advising its customers and ensuring good management of Atos's own IT infrastructure.

http://www.atosorigin.com

7.2.2 BT Global Services

Despite the "B" in BT standing for British, since its privatisation in the 1980's BT has expanded through acquisition and organic growth to become a truly global operation. It has data centres in all the larger Western European countries and parts of the Americas and Asia Pacific.

Such growth means that the degree of standardisation across its data centres varies considerably, so BT has put in place a program it calls UNITE aimed at ensuring common standards and levels of operating efficiency. Whilst this means services will vary from one country to the next, this will be hidden for those that engage with BT through its virtual data centre(VDC) programme .

VDC customers have a choice of a Windows or Linux software stack, for which it charges on a per virtual machine, per year basis with an increment for gigabytes of data stored. BT has historically provided one-to-one hardware server hosting, including mainframes where required, but it expects high growth to come from VDC. BT sells its hosting services direct to enterprises and to SMBs via its retail channel.

As BT owns its own network, it is a good choice for those who require a strong SLA for network performance across multiple countries. BT claims that 42% of its data centre power supply is from renewable sources and aims to deliver ever better environmental standards as outlined in its "Society and Environment Report" available at:

http://www.btplc.com/Societyandenvironment/ourapproach/sustainabilityreport/index.aspx

7.2.3 Cable and Wireless

Cable and Wireless (C&W) is a global telecommunication network provider that also provides managed hosting in Europe as part of its broader data centre to desktop IT consolidation services. The majority of its hosting business is the provision of dedicated infrastructure to large enterprises and government bodies; with the latter there is sometimes limited sharing between related organisations.

There are some limits in its software infrastructure provision; for example only SQL Server and Oracle databases are supported. It also offers application-specific services such as hosted Microsoft Exchange and Citrix server based computing.

C&W data centres are managed to ITIL® level 2 and are all ISO27001 compliant. It is a Microsoft gold partner and 80% of its deployment is Microsoft based, the remainder being Linux and UNIX.

www.cw.com

7.2.4 Fujitsu Services

In March 2009, Fujitsu announced it was integrating its former joint venture operation with Siemens into its own operations and, in EMEA, this means with its IT Services arm, Fujitsu Services. Whilst Fujitsu is a Japanese company, its strength in Europe has been largely down to the acquisition of UK-headquartered ICL in 1990. This history leaves Fujitsu with a sizeable legacy business of hosting VME-based ICL mainframes. Its historic strength lies in providing hosting services to enterprises although it also provides services for SMBs and ISVs.

Fujitsu has 38 data centres in Europe, with locations in all the major Western Europe countries. Through these it provides one-to-one hosting services and shared hosting service via what Fujitsu calls IaaS (infrastructure as a service).

As it sells hardware as well as services, Fujitsu favours its own kit when customers do not have a preference and its infrastructure is based on Fujitsu servers running a range of either Windows, Linux or UNIX based software stacks—Fujitsu reports its business growth in all 3 areas with Microsoft being the strongest.

Its data centres are ISO270001, SAS 70 and ITIL® v2/v3 compliant. It uses a range of charging models, ranging from per item of hardware to per transaction and unit of power consumed.

http://www.fujitsu.com/global/

7.2.5 IBM

IBM provides managed hosting services as part of its systems integration arm, IBM Global Services (IGS). IGS has 11 data centres in Europe, having consolidated from over 100 in the late 1990s, improving its already respected service levels.

IBM's managed hosting services are aimed mainly at its enterprise customers, although it does serve small and medium sized businesses but mainly through the provision of specific hosted applications servers, for example for email and CRM.

IBM has over 90,000 servers under management, with around 70% running Windows, 25% UNIX (mainly IBM's own AIX) and just 5% Linux.

http://www.ibm.com/

7.2.6 Logica

Logica is a pan-European systems integrator, which doubled in size in 2002 by merging with the Dutch consulting giant CMG. In 2006, it acquired WM-Data, a Nordic SI, which brought with it further infrastructure management capabilities. Logica offers managed hosting services to its customers as part of broader systems integration engagements. Its focus is primarily enterprise and public sector where it offers a broad range of services from pure infrastructure provision to more application-oriented services.

Logica's long history leaves it with a legacy mainframe hosting business. It still sees some growth in demand for hosting and managing customers' own kit and one-to-one hosting, but 50% of its managed hosting services are now based on shared infrastructure, where it sees strong growth, and expects this to evolve into a cloud-based offering. It charges for its hosting platform on a fixed price basis.

All data centres are ISO27001 and managed to ITIL® level 2, with level 3 training in progress. SAS 70 compliance is offered, but only where the customer demands.

http://www.logica.com/

7.2.7 Orange Business Services

Orange Business Services (OBS) is part of the France Telecom Group. It has data centres in France, UK and Switzerland. On a pan-European basis its services are targeted primarily at large enterprises, although in France it is a prominent provider to SMB and public sector customers.

Its services include both one-to-one hosting and shared infrastructure, including Microsoft, Linux and UNIX based platforms. It reports growth in demand for Linux but says that the biggest growth area is for virtualised infrastructure, whatever the operating system.

All its data centres are SAS 70 certified and OBS has achieved ISO27001 and ISO20000 compliance. Its global management procedures are aligned with ITIL® v2 best practice and ITIL® v3 is under consideration. In the past OBS has offered mainly fixed price contracts but is moving more toward per MIP or per user pricing.

http://www.orange-business.com/

7.2.8 T-Systems

T-Systems provide a wide range of hosted services as part of its broader IT services delivery focussed mainly on enterprises. T-Systems' presence is mainly in Germany and Eastern Europe, where it focussed its main effort in selling its hosted services. T-Systems did not provide any direct input for this report.

http://www.t-systems.com/

7.3 Type 3—internet service providers with managed hosting services

Many ISPs have developed what were initially web hosting services to offer managed hosting.

7.3.1 Claranet

Claranet has data centres in the all the major western European countries and targets its service at businesses of all sizes. Currently around half of its business is the provision of one-to-one managed servers, with both Windows and Linux in equal measure, and a small number of UNIX deployments. These servers are owned and managed by Claranet on behalf of its customers. It also provides shared infrastructure and is building a cloud platform where high growth is expected. Claranet's data centres are all fully ITIL® v3 compliant.

Claranet charges a fixed price per server under management, be it a physical server or a virtual server or per application instance, with additional charges based on the number of transactions and volumes of data handled

http://www.uk.clara.net/

7.3.2 COLT

COLT provides integrated managed services that enable its customers to outsource their IT infrastructure to any of its network of data centres across Europe. This includes server, web server, database, email and storage management. An "Enterprise Cloud" offering is currently being rolled-out.

COLT's charging models vary depending on the type of service provided. Dedicated infrastructure deployments tend to have a one-time set-up fee with monthly charges for the duration of the contract. Cloud services will be charged for on a pay-as-you go basis, scaling up or down depending on customer requirement.

COLT's data centres are ISO27001 compliant and managed to ITIL® v2 level.

http://www.colt.net/

7.3.3 Easynet

Easynet has 20,000 square meters of data centre space under management across all the major Western European countries. Its hosting services are targeted at businesses of all sizes, including ISVs. Half its hosting business is the provision of one-to-one managed servers, mainly running Windows or Linux, with some UNIX where demand is declining in favour of Linux. Easynet also provides hosting services based on shared infrastructure. Easynet's data centres are all ISO27001, SAS 70 and ITIL® Level 3 compliant. Easynet has built PCI-compliant applications for customers that require it.

Easynet charges a fixed price per server under management, virtual or physical, and there are incremental charges on top of this based on transactions and the volume of data processed. Easynet says it buys all of its power from providers using renewable sources, for example hydro-electric in Germany, and its data centres are in major cities, i.e.close to centre of employment.

http://www.easynet.com/

7.3.4 Global Crossing

Global Crossing (GC) is best known for its global IP and data network services and it is new to the managed hosting market in Europe. Much of its experience comes though the acquisition of Impsat, a Latin American managed services provider. This means that currently GC has 15 data centres in the Americas and it has just two in Europe, both opened in the last 9 months. GC is able to use its own global fibre network to support broad geographic requirements of its customers, making use of other carrier's networks when necessary.

Its focus is the provision of one-to-one hosting services to enterprises, mid-market organisations, governments and ISVs. GC is sceptical on the uptake of cloud computing and thinks that utility computing will not be via a shared platform.

Standards compliance is a work in progress; ITIL® v2 is in place and v3 is being worked on, as is ISO270001. SAS 70 audits are periodically carried out for its main data centres. GC described its pricing model as "bespoke per customer". GC believes the monitoring and reporting it provides for its customers is a differentiator.

http://www.globalcrossing.com/

7.3.5 Hostway

Hostway has four data centres in Europe and others in North America, Australia and South Korea. It provides services for enterprises, SMBs and ISVs and is part of the IBM ‘SaaS incubation programme' and a Microsoft Service Provider partner.

Hostway provides one-to-one hosting and shared infrastructure services and has developed a cloud computing platform. It believes that the provision of utility computing services based on shared infrastructure sold either directly or via SaaS-based ISVs applications is the future. Two thirds of its infrastructure is Microsoft-based where demand is growing fastest; the rest is Linux.

Hostway is currently seeking both ISO27001 and ITIL® v3 compliance and is ISO9001 accredited. For one-to-one hosting, Hostway generally agrees a fixed price per hardware item or by volume of data processed, but for shared infrastructure services it is moving more to consumption based pricing—per transaction, per user, per unit of time.

http://hostway.co.uk/

7.4 Ones to watch

This final section lists some of the MHPs Quocirca spoke to which have not been included above but may be in the next version of this report

7.4.1 2e2

2e2 is an IT services provider that moved into managed hosting through the acquisition of Netstore in 2008. It is primarily focussed on the UK market, providing support across Europe through partnerships. 2e2 is a Microsoft ISV incubator partner. http://www.2e2.com/

7.4.2 PEER1

A US-based MHP, just setting up in Europe, it has 2 brands; PEER1 itself which is a Microsoft-based shared infrastructure platform and Server Beach which provides dedicated servers, usually Linux based.

http://www.peer1.com/

7.4.3 eLINIA

Has 3 UK-based data centres; for its main data centre in Slough it uses a co-location provider called Equinix which buys its power from the Slough Heat and Power Energy Centre. eLINIA reports a sharp growth in cloud-based offerings over dedicated infrastructure and requirements for Microsoft growing faster than Linux and UNIX.

http://www.elinia.com/

7.4.4 Centrinet

Centrinet provides a data centre facility in Lincoln, UK, which is called "Smartbunker". Its electricity is provided by a nearby wind powered energy supplier.

http://www.centri.net/

7.4.5 OpSource

OpSource is a US-based MHP that set up in Europe in 2004 and is focussed purely on the ISV market. OpSource has recently received a $10M investment from NTT Europe Online to help expansion in Europe.

http://www.opsource.net/

About NTT Europe Online

NTT Europe Online provides managed hosting, security and application management for dynamic enterprises internationally. These services provide the reliability, availability, security and scalability needed to underpin business success online.

NTT Europe Online designs managed hosting solutions with the customer's business needs in mind. These solutions are built around ITIL®, ISO20000, PRINCE2, ISO 27001 certification for information security management and best practice guidelines.

As part of NTT Communications, NTT Europe Online has the global reach and scale to support businesses of all sizes. NTT Communications is the global data and IP services arm of the Fortune Global 500 telecom leader, NipponTelegraph & Telephone Corporation (NYSE: NTT).

NTT was ranked no. 1 among the top 10 telecom companies worldwide by Standard and Poors with a Credit Rating of "AA". NTT also has approximately $9 billion in cash cushioning it from many of the issues created by the current financial situation.

NTT Europe Online's solutions include:

• Managed Hosting in single, dual or multi-tiered infrastructures
• Managed Hosting in multiple environments (production, pre-production, development etc)
• Managed Hosting in redundant and resilient configurations • Multi-site environments • Application Management: management of a range of software
• Global IP Network: NTT owns and manages its Global Tier 1 Network architecture
• Business Continuity: clustering, global load balancing, built-in redundancy, mirroring, multi-site solutions, multi-environment solutions and disaster recovery
• Virtualisation: managed virtualisation solutions for flexibly scaling solutions up and down in line with business demands
• Content Delivery Network: caching network manages the surges in web traffic that can lead to service disruption
• Security: range of unified threat management (UTM) services • SaaS: infrastructure for Software as a Service in conjunction with Microsoft, Sun, Oracle and other application partners
• Data Centre Services: world class data centre services from 27 major cities globally, including eight in Europe
• User defined Service Level Agreements that cover the entire solution, not just components

 http://www.ntteuropeonline.com/

About Quocirca

Quocirca is a primary research and analysis company specialising in the business impact of information technology and communications (ITC).With world-wide, native language reach, Quocirca provides in-depth insights into the views of buyers and influencers in large, mid-sized and small organisations. Its analyst team is made up of real-world practitioners with firsthand experience of ITC delivery who continuously research and track the industry and its real usage in the markets.

Through researching perceptions, Quocirca uncovers the real hurdles to technology adoption—the personal and political aspects of an organisation's environment and the pressures of the need for demonstrable business value in any implementation. This capability to uncover and report back on the end-user perceptions in the market enables Quocirca to advise on the realities of technology adoption, not the promises.

Quocirca research is always pragmatic, business orientated and conducted in the context of the bigger picture. ITC has the ability to transform businesses and the processes that drive them, but often fails to do so. Quocirca's mission is to help organisations improve their success rate in process enablement through better levels of understanding and the adoption of the correct technologies at the correct time.

Quocirca has a pro-active primary research programme, regularly surveying users, purchasers and resellers of ITC products and services on emerging, evolving and maturing technologies. Over time, Quocirca has built a picture of long term investment trends, providing invaluable information for the whole of the ITC community.

Quocirca works with global and local providers of ITC products and services to help them deliver on the promise that ITC holds for business. Quocirca's clients include Oracle, Microsoft, IBM, O2, T-Mobile, HP, Xerox, EMC, Symantec and Cisco, along with other large and medium sized vendors, service providers and more specialist firms.

Details of Quocirca's work and the services it offers can be found at www.quocirca.com

REPORT NOTE:

This report has been written independently by Quocirca Ltd to provide an overview of the managed hosting market.
The report draws on Quocirca's extensive knowledge of the technology and business arenas, and provides advice on the approach that organisations should take to benefit from managed hosting.
Quocirca would like to thank NTT Europe Online for its sponsorship of this report and the NTT Europe Online customers who have provided their time and help in the preparation of the case studies.

Contents

1 INTRODUCTION—FROM MAINFRAME BUREAUX TO CLOUD COMPUTING
2 REPORT BACKGROUND
3 WHY MANAGED HOSTING?
4 WHAT TO LOOK FOR IN AN MHP
4.1 TYPES OF MHP
4.2 MHP TARGET MARKETS
4.3 CHARGING MODELS
4.4 STANDARDS
4.5 SERVICE LEVEL AGREEMENTS (SLA)
4.6 REDUNDANCY
4.7 APPLICATION TESTING
5 MHP INFRASTRUCTURE
6 CONCLUSIONS .
7 MHP SUMMARY DESCRIPTIONS
7.1 TYPE 1—PURE PLAY MHPS
7.1.1 NTT Europe Online
7.1.2 Rackspace Hosting
7.1.3 Savvis
7.1.4 Attenda
7.1.5 7global
7.2 TYPE 2—SYSTEMS INTEGRATORS THAT OFFER MANAGED HOSTING AS PART OF A BROADER SERVICE OFFERING
7.2.1 Atos Origin
7.2.2 BT Global Services
7.2.3 Cable and Wireless
7.2.4 Fujitsu Services
7.2.5 IBM
7.2.6 Logica .
7.2.7 Orange Business Services
7.2.8 T-Systems
7.3 TYPE 3—INTERNET SERVICE PROVIDERS WITH MANAGED HOSTING SERVICES
7.3.1 Claranet
7.3.2 COLT
7.3.3 Easynet
7.3.4 Global Crossing
7.3.5 Hostway
7.4 ONES TO WATCH
7.4.1 2e2
7.4.2 PEER1
7.4.3 eLINIA
7.4.4 Centrinet
7.4.5 OpSource
ABOUT NTT EUROPE ONLINE
ABOUT QUOCIRCA